Why Fixed- Indexed Annuities? A Closer Look at Protecting Retirement Income

One of the most critical things in retirement is not having enough income to last one’s lifetime. An annuity can help you by protecting retirement income. Retirees need a reliable source of income that protects them from the complex issues of unpredictable market-creating havoc in their retirement portfolio. For this reason, fixed-indexed annuities are becoming a standard solution in financial planning, along with other client-appropriate investments.

Once thought of as only a standalone retirement income solution, annuities are now commonly recognized as one of many components of a retirement portfolio.  Here’s why:

  • Fixed-indexed annuities protect during times of market decreases; withdraw from the annuity to avoid liquidating other accounts at low share prices
  • Fixed-indexed annuities purchase a one-time payment or period purchases.
  • Fixed-indexed annuities can be immediate, meaning payments commence at once or deferred with payments starting later. Payment options can vary, including monthly or quarterly.

Annuities protect while they grow:

All annuities offer tax-efficiency while they grow; they lock in gains based on market performance. However, when the market declines, the annuity protects the accumulation and initial investment. Another benefit of annuities is that they provide a guaranteed death benefit of the initial investment and can include survivor benefits.

Annuities provide tax-deferral:

A portfolios real return must include taxes paid on the portfolio’s growth. With annuities, any earnings grow tax-deferred; taxes are due on the withdraws over time. More money can stay invested instead of going to taxes. Another feature of annuities is that they have higher contribution limits than traditional pre-tax retirement investments.

The ability to manage risk:

With longer lifespans comes more threat to retirement savings. One must consider how a retirement portfolio can be impacted by market risk early in retirement. Even when the market recovers, the portfolio’s value may not change due to the sequence of returns risk.

“This can dig a hole from which it becomes increasingly difficult to escape, as portfolio returns must exceed the growing withdrawal percentage to prevent further portfolio depletion.” – Wade Pfau, Professor of Retirement Income at The American College.

If you have questions on how an annuity can help you manage risk, provide tax-deferral, and continue to grow your retirement portfolio, contact me to see if an annuity is appropriate for you.


Additional Disclosure: The newsletter and links are being provided as a service to you. Please note that the information and opinions included are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. This presentation is not endorsed or approved by the Social Security Office or any other Government Agency. Planning services are available at additional cost and offered only by appropriately licensed registered investment advisors. Fixed Index Annuities are designed to meet long-term needs for protecting retirement income, and they provide guarantees against the loss of principal and credited interest and offer the reassurance of a death benefit for your beneficiaries.

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For those who are looking for financial advice, we realize the available options are many and deciding who to work with is a challenging problem. At Haven Financial Group, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

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